In opinion of FX Strategists at UOB Group, if Cable manages to close above 1.2380 it could then attempt to move to the 1.2450 area.
Key Quotes
24-hour view: “While our view for a higher GBP was not wrong, the strength of the rally surprises us as GBP easily took out last month’s 1.2310 top and surged to a 5-week high of 1.2353. The rally over the past 3 days is severely overbought and while further GBP strength is not ruled out, the next resistance at 1.2380 is a strong level and is unlikely to yield so easily. Support is at 1.2290 but only a move below 1.2255 would indicate that the upward pressure has eased”.
Next 1-3 weeks: “We indicated yesterday (05 Sep, spot at 1.2245) there is “scope for the rebound in GBP to extend above 1.2310” and added, the “prospect for extension to 1.2380 is not high (there is a minor resistance at 1.2350)”. GBP subsequently moved above the minor resistance and touched 1.2353. After the strong and rapid rise, a move above 1.2380 would not be surprising. However, the outsized gain over the past three days appears to be running ahead of itself and for now, we have doubts on whether GBP could maintain the pace of its current advance. That said, only a break of 1.2170 (strong support was at 1.2120 yesterday) would indicate the recovery phase has run its course. Looking ahead, if GBP were to close above 1.2380 in NY, it would suggest the recovery could extend to 1.2450, possibly 1.2500”.
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